ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI, C.R. BUILDING vs. ASR MARKET VENTURES PRIVATE LIMITED, DELHI

2 ITA No.3161/Del/2023

assessment order made under the Act before the date of issue of Notifications. 2. On the facts and in the circumstances of the case. the Ld. CIT(A) has erred in the light of para no. 6 of the Notification GSR 127(B) dated 19.02.2019 as the assessment order making an addition of Rs. 1,84,86,525/- under section 56(2)(viib) was passed on 28.12.2018, whereas the date of issue of Notification is 19.02,2019, Hence, para no. 4 of the Notification based on which the Ld. CIT(A) has given relief to the assessee is not applicable to this assessee's case as the assessment order was passed before the date of notification. 3. Brief facts of the case:- The assessee is an e-commerce

startup, currently operating a fitness portal named ‘FITPASS’. The

assessee is a recognized ‘startup’ by the Department of Promotion of

Industry and Internal Trade (DPIIT), Ministry of Commerce and

Industry, Govt. of India and has been issued a certificate, number

DIPP355343, dated 01.05.2019, which is reproduced for ready

reference:-

3 ITA No.3161/Del/2023

3.1. In this case, the AO passed assessment order u/s 143(3) of

the Act dated 28.12.2018 making an addition of Rs.1,84,86,525/-

u/s 56(2)(viib) of the Act. According to the assessee, the addition

was made on the following grounds:-

‘The Valuation Report submitted by the Assessee could not be relied upon because the Valuation Report prepared by the Valuer Firm was based on facts and figures, as well as profits/receipts, provided by the management to the Valuer Firm. Additionally, the Assessee did not apply for registration with DPIIT to be recognized as a startup and hence exemption under Section 56(2) (viib) of the Act would not be exempted. The Assessee, aggrieved by the Assessment Order dated 28.12.2018 passed by the Ld. AO, preferred an appeal before the Commissioner of Income Tax (Appeals) ('CIT(A)').”

appeal before the ld. CIT(A)/NFAC. By an order dated 07.08.2023,

the NFAC deleted the addition of Rs.1,84,86,525/- by holding that

the assessee is a ‘startup’ meeting all the parameters and criteria of

notification no.G.S.R.127(E) dated 19.02.2019.

is in appeal before us.

decision of the ld. CIT(A)/NFAC erred in holding that section 56(2)(viib)

of the Act is not applicable to the assessee's case in view of para no. 4 of

the Notification GSR 127(E) dated 19.02.2019, without considering the

scope given vide para no. 6 of the abovementioned Notification, wherein it

has been clarified that, para no. 4 is not applicable to the shares in

respect of which an addition made us 56(2)(viib) of the Act has been made

4 ITA No.3161/Del/2023

in an assessment order made under the Act before the date of issue of

Notifications. Further, it was submitted that the Ld. CIT(A) has erred in

the light of para no. 6 of the Notification GSR 127(B) dated 19.02.2019 as

the assessment order making an addition of Rs. 1,84,86,525/- under

section 56(2)(viib) was passed on 28.12.2018, whereas the date of issue of

Notification is 19.02,2019, Hence, para no. 4 of the Notification based on

which the Ld. CIT(A) has given relief to the assessee is not applicable to

this assessee's case as the assessment order was passed before the date

of notification.

para-4 (ii) of Circular No.22/2019[F.No.173/149/2019-ITA-I] Dated

30.08.2019 submitted that the appeal filed by the Revenue was not

maintainable on the ground that in respect of pending appeal before the

ITAT, the Department shall not press the ground relating to addition u/s

56(2)(viib) in the case of recognised ‘startup’ and which has submitted

Form No.2. In this regard, the ld. AR also submitted Form No.2 dated

01.05.2019 as per Annexure-C of the paper book, which was also

submitted before the NFAC. The same was duly forwarded by the NFAC to

the AO, but no report was received from the AO and the NFAC admitted

the additional evidence including the aforesaid Form No.2 and the copy of

certificate of recognition dated 01.05.2019 issued to the assessee

company as a ‘startup’ by the Department of Industrial Policy and

Promotion (in short ‘DIPP’) as discussed in para-6 of the appellate order.

The Ld. DR also agreed with the submission of the Ld. AR.

5 ITA No.3161/Del/2023

on record. As stated above, the assessee is a recognised ‘startup’ and the

addition of Rs.1,84,86,525/- in this case was made u/s 56(2)(viib) of the

Act. The relevant para-4 of the aforesaid circular is reproduced as

under:-

“4. The clarification issued on 9th August, 2019 provided that the provisions of the section 56(2)(viib) of the Act shall also not be applicable in respect of assessment made before 19th February, 2019 if a recognised Startups has filed declaration in Form No. 2. The following procedure is laid down with regard to addition made under section 56(2)(viib) of the Act in assessment order passed before 19th February, 2019:— i. In case the appeal against the assessment is pending before the Commissioner of Income-tax (Appeal) [CIT(A)], the appellate order should be passed by CIT(A) on or before 31st December, 2019 after taking into account the fact that the Startup has filed declaration in Form No. 2 and hence the provisions of section 56(2)(viib) of the Act are not applicable for the addition made under section 56(2)(vib) of the Act before February, 2019. The Department shall not file further appeal on the issue of addition made under section 56(2)(viib) of the Act; ii. In case the case is pending before the ITAT, the Department shall not pres the ground relating to addition under section 56(2)(viib) of the Act in these cases.’ 9. Further, the assessee has also filed Form No.2, which is reproduced

as under:-

6 ITA No.3161/Del/2023

Order pronounced in the open court on 31st May, 2024.

Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 31.05.2024. ff^? ff^ ff^ ff^